Advertisement
Singapore markets close in 7 hours 41 minutes
  • Straits Times Index

    3,204.62
    -18.32 (-0.57%)
     
  • Nikkei

    39,098.68
    +836.48 (+2.19%)
     
  • Hang Seng

    16,742.95
    0.00 (0.00%)
     
  • FTSE 100

    7,684.49
    +21.98 (+0.29%)
     
  • Bitcoin USD

    51,408.64
    -181.49 (-0.35%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,087.03
    +105.23 (+2.11%)
     
  • Dow

    39,069.11
    +456.87 (+1.18%)
     
  • Nasdaq

    16,041.62
    +460.72 (+2.96%)
     
  • Gold

    2,036.20
    +5.50 (+0.27%)
     
  • Crude Oil

    78.28
    -0.33 (-0.42%)
     
  • 10-Yr Bond

    4.3270
    +0.0020 (+0.05%)
     
  • FTSE Bursa Malaysia

    1,544.75
    -0.74 (-0.05%)
     
  • Jakarta Composite Index

    7,339.64
    -7,349.02 (-50.03%)
     
  • PSE Index

    6,903.15
    +5.79 (+0.08%)
     

Applied Materials (AMAT) Q3 Earnings & Sales Beat, Fall Y/Y

Applied Materials Inc. AMAT reported third-quarter fiscal 2023 non-GAAP earnings of $1.90 per share, surpassing the Zacks Consensus Estimate by 9.8%. However, the figure declined 2% from the year-ago fiscal quarter’s reported figure.

Net sales of $6.43 billion were down 1% from the year-ago fiscal quarter’s level. The figure surpassed the Zacks Consensus Estimate of $6.16 billion.

Weakness in the Semiconductor Systems segment mainly led to a decline in top-line growth. Applied Materials continued to witness sluggishness in its Display segment.

Weakening momentum across Korea, Taiwan, Southeast Asia and China was a negative.

The company’s strength in the Applied Global Services segment was a positive. It experienced solid momentum across the United States and Europe during the reported quarter.

AMAT remains optimistic about its strategies and investments in IoT and AI. Its strength in IoT, Communications, Auto, Power and Sensors (ICAPS) is likely to continue aiding its position in the semiconductor industry in the days ahead.

Its broad-based, diversified portfolio and strong services business remain its key growth drivers.

Applied Materials has returned 28.4% in the year-to-date period, outperforming the industry’s growth of 21.5%.

Shares of the company have surged 2.4% in the after-hours trading sessions owing to better-than-expected guidance for fiscal fourth-quarter 2023. This indicates that the slump in the chip industry has started to fade.

Applied Materials, Inc. Price, Consensus and EPS Surprise

Applied Materials, Inc. Price, Consensus and EPS Surprise
Applied Materials, Inc. Price, Consensus and EPS Surprise

Applied Materials, Inc. price-consensus-eps-surprise-chart | Applied Materials, Inc. Quote

Segments in Detail

Semiconductor Systems generated sales worth $4.68 billion, which contributed 73% to its net sales, reflecting a decline of 1.2% from the year-ago fiscal quarter’s reading. The figure surpassed the Zacks Consensus Estimate of $4.49 billion. Weakness in leading-edge foundry logic and NAND was a major concern.

Strength in ICAPS driven by solid adoption of 200-mm systems was a plus. The strong performance of ICAPs in Europe remained a positive.

Applied Global Services reported sales of $1.46 billion (23% of net sales), up 3.1% from the prior-year fiscal quarter’s reported number. The figure surpassed the Zacks Consensus Estimate of $1.43 billion. Record sales of 200-mm systems, along with strength in its subscription business, contributed well.

Sales from Display and Adjacent Markets were $235 million (4% of net sales), down 29.4% from the year-ago fiscal quarter’s reported level. The figure came ahead of the Zacks Consensus Estimate of $169 million.

Revenues by Geography

The United States, Europe, Japan, Korea, Taiwan, Southeast Asia and China generated sales of $1.04 billion, $661 million, $478 million, $988 million, $1.34 billion, $180 million and $1.73 billion, respectively, contributing 16%, 10%, 8%, 15%, 21%, 3% and 27% to net sales, respectively.

Sales in the United States, Europe and Japan increased 43.3%, 24.9% and 9.1%, respectively and 63.5%, 1.9% and 13.8%, respectively, from the respective year-ago fiscal quarter’s readings. Sales in Korea, Taiwan, Southeast Asia and China fell 19.3%, 12.5%, 33.3% and 3.5%, respectively, from the year-ago quarter’s corresponding levels.

Operating Results

The non-GAAP gross margin was 46.4%, which expanded 20 basis points (bps) from the year-ago fiscal quarter’s figure.

Operating expenses were $1.17 billion, up 8.5% from the year-ago fiscal quarter. As a percentage of sales, the figure expanded 170 bps from the year-earlier fiscal quarter’s level to 18.3%.

The non-GAAP operating margin of 28.3% for the reported quarter contracted 170 bps from the prior-year fiscal period’s actuals.

Balance Sheet & Cash Flow

As of Jul 30, 2023, cash and cash equivalent balances and short-term investments were $6.5 billion, up from $5.1 billion as of Apr 30, 2023.

Inventories were $5.8 billion in third-quarter fiscal 2023 compared with $5.9 billion in second-quarter fiscal 2023. Accounts receivables increased to $5.2 billion in the reported quarter from $5.5 billion in the previous fiscal quarter.

Long-term debt was $5.460 billion at the end of the reported quarter compared with $5.459 billion at the end of the previous fiscal quarter.

Applied Materials generated a cash flow of $2.6 billion compared with $2.3 billion in the prior fiscal quarter.

AMAT returned $707 million to its shareholders, of which share repurchases were worth $439 million and dividend payments amounted to $268 million.

Guidance

For fourth-quarter fiscal 2023, Applied Materials expects net sales of $6.51 billion (+/-$400 million). The Zacks Consensus Estimate for the same is pegged at $5.87 billion.

AMAT anticipates Semiconductor Systems, AGS and Display revenues to be $4.75 billion, $1.42 billion and $290 million, respectively.

Management expects non-GAAP earnings per share in the band of $1.82-$2.18. The Zacks Consensus Estimate for the same is pegged at $1.58.

Applied Materials expects a non-GAAP gross margin of 47% and non-GAAP operating expenses of $1.17 billion. It projects a non-GAAP tax rate of 12.3%.

Zacks Rank & Stocks to Consider

Currently, Applied Materials carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Badger Meter BMI, Arista Networks ANET and Salesforce CRM. While Badger Meter sports a Zacks Rank #1 (Strong Buy), Arista Networks and Salesforce each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Badger Meter shares have gained 53% in the year-to-date period. BMI’s long-term earnings growth rate is currently projected at 15.05%.

Arista Networks shares have gained 44.2% in the year-to-date period. The long-term earnings growth rate for ANET is currently projected at 18.75%.

Salesforce shares have gained 57.4% in the year-to-date period. CRM’s long-term earnings growth rate is currently projected at 19.25%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Salesforce Inc. (CRM) : Free Stock Analysis Report

Badger Meter, Inc. (BMI) : Free Stock Analysis Report

Applied Materials, Inc. (AMAT) : Free Stock Analysis Report

Arista Networks, Inc. (ANET) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research